All about F1 cost cap, previous breaches, and all we know about the teams who have potentially breached the cap in 2024

The reports about multiple F1 teams being guilty of breaching the cost cap for 2024 have been swirling around the paddock. The racing sphere has speculated about which teams look guilty in the eyes of the FIA.

But many have wondered about the precedent surrounding the cost cap. From where the concept was first introduced to being a hanging sword on the neck of the team's finance department, let's take a look at all the intricacies revolving around the cost cap in F1:

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What is the F1 cost cap?

The cost cap was first announced in 2019 by the FIA. It aimed at levelling the playing field among the F1 teams, as over the years, the biggest spenders had a substantial edge over their rivals in the sport.

To counter such tendencies within the grid, the FIA had initially proposed this idea, which was enacted in 2021 and has been in effect since then. For the first year, the cap was set at $145 million, and it covered the aspects that were related to the car's performance.

However, other aspects, like the team's marketing, the salaries of the drivers, and the team's three highest-paid staff members, and a host of other exemptions were given from the get-go. This cap was understood to reduce by an additional $5 million for the next few years, but with inflation and the calendar expanding, amendments were often made to it.

For the 2024 season, the amount was understood to be close to $165 million, which the 10 F1 teams had to abide by.

What are the breaches that a team can conduct?

Subsequently, the next question surrounding the cost cap is what would happen if a team overspends in a year. FIA had also thought about this and had segregated offences into three types:

Procedural Breach

It only happens when a team has not abided by the regulations set for the cost cap documentation. Incorrect documents or accounts, late submission, and other such grievances fall in this category.

Here, the Cost Cap Administration sets up an Accepted Breach Agreement (ABA) if the team agrees to their wrongdoing and penalizes them with a monetary fine, along with covering the costs for the preparation of the ABA.

Minor Overspend Breach

Here, the team has overspent by less than five percent of the cost cop. Subsequently, if the team agrees to the breach, the ABA can either send a reprimand, deduct constructors and/or drivers points, ban the team from sessions or races, limit testing, reduce their cost cap, or impose a monetary fine.

The ABA can decide any combination of penalties for the team, depending upon its interpretation of the case.

Material Overspend Breach

This brings out the worst kind of penalties for any team. For this, an F1 team would have to overspend by over 5 percent of the cost cap, and the Cost Cap administration would dock the team's constructors' championship points and could impose any of the previously mentioned penalties, along with the possibility of disqualifying the team from the world championships.

Previous cost cap breaches

While 2022 and 2023 saw all 10 teams stay within the cost cap, this has not been the case every single time on the grid. The title for being the first team to have a procedural breach was Williams.

The team had failed to meet the deadline of 31 March 2022 for filing its 2021 documents. It was then handed a $25,000 fine and bore the costs incurred by the Cost Cap Administration to ready up the ABA.

But this was a small breach; Aston Martin was handed a bigger penalty for a procedural breach in 2021. It was fined $450,000 for incorrectly adjusting expenditures for the building of its new headquarters and other spending.

Despite the hefty fines, the two teams remained within their budget. However, the same cannot be said for Red Bull.

Former Red Bull team principal hosting a press conference ahead of the 2022 F1 Mexican GP - Source: Getty

Red Bull had been caught red-handed by the Cost Cap Administration for overspending in 2021. The team had exceeded the cap by £1,864.000 or 1.6% of that year's cost cap by the documents that it had submitted to the FIA.

However, if it had correctly accounted for their Notional Tax Credit, the number would have been smaller; $432,652 or 0.37% of the cost cap. Despite the team's accounting mistake and a small overspend in the grand scheme of things, the Cost Cap Administration implied stringent action upon the Austrian giant.

In the ABA, the team was handed a $7 million fine and a 10 percent reduction in their wind tunnel testing and CFD limit.

On the other hand, no team has conducted a material overspend breach in the previous reports released by the FIA, so no one knows what severe penalties they would like to impose on such an offender.

What do we know about the potential breaches of the 2024 cost cap?

Coming back to the current scenario, the chatter within the F1 paddock has riled up. Aston Martin is understood to have fallen prey to a procedural breach again, but the details about the rest of the story remain vague until the FIA sheds some light on it.

But the paddock is focusing on the other F1 team that has seemingly conducted a substantial breach of the cost cap. The large consensus points toward one of the top four teams to be the possible offender.

Meanwhile, reports suggest that Ferrari and Red Bull are clear of any shenanigans going on in the background, leaving only McLaren and Mercedes from that group to receive such a clearance.

However, with no confirmation from the FIA, there are still dark clouds looming over what would happen in the upcoming days, and which or if any, F1 team would be found to have conducted such a major grievance.